p5-10 ansers 2

# p5-10 ansers 2 - 2 Assessing return and risk Swift...

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(1) The range of possible rates of return. (2) The expected value of return. (3) The standard deviation of the returns. (4) The coefficient of variation of the returns. Project 257 Project 432 Rate of return Probability Rate of return Probability -10% 0.01 10.0% 0.05 10 0.04 15.0% 0.1 20 0.05 20.0% 0.1 30 0.1 35.0% 0.15 40 0.15 30.0% 0.2 45 0.3 35.0% 0.15 50 0.15 40.0% 0.1 60 0.1 45.0% 0.1 70 0.05 50.0% 0.05 80 0.04 100 0.01 2. Assessing return and risk Swift Manufacturing must choose between two asset purchases. The annual rate a. For each project, compute: b. Construct a bar chart of each distribution of rates of return. c. Which project would you consider less risky? Why?

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e of return and the related probabilities given in the following table (on page 268) summarize the firm’s analysis to this poi
int.

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(1) The range of possible rates of return. Solution:- Computation of the Range of possible rate of return Project 257 Project 432 wqfdqwf (2) The expected value of return. r = Expected return: (Pg. 279 in book) Project 257 Rate of Return Probability Weighted Value formula in book -0.1 0.01 0 0.1 0.04 0 0.2 0.05 0.01 0.3 0.1 0.03 0.4 0.15 0.06 0.45 0.3 0.14 0.5 0.15 0.08 0.6 0.1 0.06 0.7 0.05 0.04 0.8 0.04 0.03
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## This note was uploaded on 04/22/2011 for the course FIN & ACC 504 & 502 taught by Professor Harper&tai during the Spring '11 term at Grand Canyon.

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p5-10 ansers 2 - 2 Assessing return and risk Swift...

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